For those who get nostalgic about when James Buchanan was president. Just kidding. Sort of.

Saturday, September 18, 2004

More Hooplah on the Minimum Wage

As election time looms, commentary on the minimum wage inevitably rears its ugly head. And while most reporters these days are content to parrot the same hype that our elected officials give because they lack the creativity to dig deeper into a story, there are snippits of reality showing up here and there in the midst of wishy-washy articles about "getting the poor back on their feet."

The first is this hopeful piece from the San Jose Mercury-News, describing Gov. Schwarzenegger's recent veto of a bill that would have increased California's minimum wage to $7.75 an hour -- the highest in the nation.

"Now is not the time to create barriers to our economic recovery or reverse the momentum we have generated," he said. "I want to create more jobs and make every California job more secure."

And that's not all. The California Chamber of Commerce actually opposed the bill for the correct reason that minimum wage laws, as delicious as they sound, are only likely to increase unemployment: The California Chamber of Commerce praised the veto, saying the legislation would have created a "huge disincentive for employers looking for locations to expand operations or locate new jobs."

Glory be. Maybe Schwarzenegger's California won't be worse off under his watch. For now, California remains in third place in the miminum wage standings behind -- you guessed it -- Oregon and Washington, whose laws are "adjusted for inflation."

On the same day as Arnie's big veto, Oregon announced an increase in their own minimum wage. Eugene's Register-Guard had a happy little story for one worker who'd be enjoying more cash thanks to the bill.

Rachel Strasshofer considers the raise her employer gave her earlier this year - a 15-cent bump to $7.25 an hour - a big deal.

"When I got that raise, it helped me pay bills," said Strasshofer, 20, as she cleaned tables at the Big Town Hero sandwich shop on Crescent Avenue in Eugene Friday afternoon.

Other Oregon workers at the bottom of the wage scale will get a similar raise starting Jan. 1, when the state will hike the minimum wage by 20 cents, to $7.25 an hour, to help offset inflation. The state on Friday announced the new rate.

Strasshofer, who started $7.10 an hour when she began at Big Town Hero, said the increase should help other workers as it did her. "For people who work a lot of hours, it is significant."

It's enough to bring a tear to my eye. Unfortunately, the article fails to dig up someone who got fired because the company couldn't afford to simply pay all their employees more money. To its credit, though, it did point out the following:

Although minimum wage earners and workers rights advocates applaud the inflation-offsetting increases, many business owners argue the system chokes job creation.

"It's very coincidental that this comes right on the heels of another announcement - an increase in our unemployment rate," said Mike McCallum, executive director of the Oregon Restaurant Association. The state jobless rate rose to a seasonally adjusted 7.4 percent in August, up from 6.8 percent in July.

"We continue to be leaders in the minimum wage rate, and we're going the wrong way" on the jobless rate, McCallum said, adding that low-margin restaurants have trouble passing the increased labor costs on to customers. "If they do pass them on, they lose customers."

And as it is their job to do, officials scoffed at such silly capitalist propaganda. Pish and tosh, says Chuck Sheketoff, executive director of the Oregon Center for Public Policy, calling those arguments "slop."

"They should be more concerned about Mad Cow disease coming back and what that would do to the industry rather than complaining about the minimum wage," Sheketoff said.

Yeah, take that, local businesses. Deal with it!

Of course no news on the minimum wage would be complete without a check on what our European friends are doing. Britain's the Guardian reported last Monday that employers were backtracking on committments to raise the minimum wage after being hit hard by initial increases, drawing the fury of trade unions, of course.

"It looks as if the CBI is getting ready to oppose any further increases in the minimum wage even though it helps fewer than was originally planned and had no adverse effect on jobs," said Brendan Barber, the general secretary. "The minimum wage has been a huge success, and further careful increases to boost the income of the low paid above inflation have always been part of the deal. Too many CBI members already practise boardroom excess. Now it seems they want to keep the poor in their place, too."

Leave it to government agencies to create class warfare. Nonetheless, the government is, to their chagrin, limited by reality. Bad economic policies will breed a bad economy, and chief among them is the belief that wages can be coercively raised and employers will simply bear the burden. Well, if that were so, why not just raise the minimum wage to $80 per hour so everyone can be rich?

Within the past ten years it has become conventional wisdom among the left that we can get all of the benefits of raising the minimum wage "a reasonable amount" without increasing unemployment. This amounts, of course, to an assertion that we can easily put aside economic law. An increase in the minimum wage will not benefit all low income workers. It will help only some of them at the expense of others. Why is this so? Well, economic law tells us that if the price of any good increases, people will want to buy less. This is true for gasoline. It is true for apples. It is true for iPods. It is also true for labor services.

Even the "living wage" zealots at ACORN recognize this. In 1995 ACORN sued the state of California to get itself declared exempt from California labor law, so it would not have to pay the minimum wage to its own employees. In its brief submitted to the Court of Appeal, ACORN argued, "The more that ACORN must pay each individual outreach worker—either because of minimum wage or overtime requirements—the fewer outreach workers it will be able to hire."

That's the reality that no government can get around no matter what kind of rhetoric they use. It is impossible to force businesses to both raise wages and keep all their employees. A raised minimum wage comes at the expense of unemployment, and that's the economic reality of things.

Ritenour further points out that most people who work the minimum wage get paid above that wage after a year. So the key to getting paid more is simply to stay employed. That is precisely the problem with minimum wage laws, it makes it difficult for lower-skilled workers to get employed in the first place.

One more thing to note. Ritenour first points out that the "poor" are not people who lack the necessities of life. Such people are very rare in America. Says Ritenour:

Data from the most recent census, however, reveal that those who are officially classified as "poor" by the United Statesgovernment possess a surprising amount of wealth.[2] The official "poor" are not that poor after all. For example, for those persons classified as "poor," 46% own their own home and 76% have air conditioning. More than 66% of the "poor" have more than two rooms of living space per person. In fact, the average "poor" United States citizen has more living space that the average citizen (not "poor" citizen) living in Austria, Belgium, France, Finland, Germany, Greece, Ireland, Italy, Portugal, Spain, and the United Kingdom; 97% of the official American "poor" own a color television and over half own more than one; 62% of the "poor" have either cable or satellite television. Far from being undernourished, the "poor" have a greater obesity problem than the rest of the population. The most common hardship that most poor people face is making late rent and utility payments.

So there you have it. The minimum wage war will rage on in our political annals, with really the bulk of the arguments focusing on how much should the increases be rather than should we get rid of it. The reason why is that 99% of Americans are not going to devote the time and energy to give an issue the thought it needs. That's simply a reality of human nature. As a result, only the superficial arguments will be considered, and it sure looks juicy to the college students, the "working men," and the conscientious liberal artists of America (of which there are plenty of) to support making poor people richer. That's essentially what minimum wage laws propose, and that's what will be given time in the circles of debate among ordinary Americans, which unfortunately only go skin deep on these important issues.

This is the fundamental flaw with American politics. It's sad, but for now the rest of us will just have to bite the bullet until somehow some sanity finds its way into our political system once again.